BHP Group Ltd. reported flat first-half profit from the year before, as the world’s biggest miner felt the impact of nickel-asset impairments and other provisions even as demand for iron ore and other core commodities remained resilient.
The company’s underlying attributable profit from continuing operations in the six months to December 31 was $6.57 billion, it said on Tuesday in a regulatory filing. That compared to analysts’ estimate of $6.73 billion. It will pay an interim dividend of 72 cents a share, down from 90 cents in the previous six months.
BHP’s net income in the period slumped 86% from the year before to $972 million. Last week it announced a $2.5 billion impairment on the value of its Australian nickel assets, after a surge in supply of the battery metal from Indonesia dragged down prices. It placed all the assets under review and said it could mothball them. The company also said it would nearly double the provision set aside to cover damages from the 2015 Samarco dam failure to $6.5 billion.
The six-month period “had its challenges,” BHP said, in a statement referring to its nickel assets, which “offset an otherwise solid operation performance and overall healthy commodity prices.”
BHP said all its assets were on track to meet full-year output and cost targets, with demand from top customer China “healthy” despite weakness in its housing sector.
See-sawing demand for its commodities have whiplashed BHP’s earnings, a trend that started during the pandemic and has continued due to the deteriorating outlook for China’s economy and particularly its metals-intensive construction and property sectors. Last year, just 12 months after posting its highest-ever profit as prices soared, the company reported its lowest annual profit in three years.
“In the near term, the economic outlook for the developed world is expected to improve modestly after a difficult year for both steel and non-ferrous metals demand,” BHP said in the statement. “China and India are expected to remain relative sources of stability for commodity demand.”
Iron ore remains company’s most important revenue earner. Prices of the steelmaking material surged 28% over the reporting period and remain historically high, and that has prompted major producers including BHP to consider development of once-stranded deposits.
With China reopened Monday after its weeklong Lunar New Year holiday, investors will be watching whether the nation’s once insatiable demand for metals will be revived. Construction is expected to ramp up next month, and there will be a focus on whether Beijing will inject further fiscal stimulus to effectively counter steep declines from the crash in the metals-intensive housing market.
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